A. Break-even point in units Assume that you are part of the accounting team for Koller Computing. The company currently expects to sell 700 units for total revenue of $17,500 each month. Koller Computing estimates direct materials costs of $3,150, direct labor costs of $4,200, variable overhead costs of $2,100, and variable selling and administrative costs of $1,050. The company also expects fixed costs of $4,000, which includes fixed overhead and selling and administrative costs. Using this information, complete the contribution margin income statement shown below. Koller Computing Contribution Margin Income Statement Kindly select which of the two is the correct answer in the sales colum as well as input the correct $ values in the corresponding columns Sales $__________ a. Less: variable cost b. Less: Fixed Cost $__________ b. Contrubution margin b. Gross margin $__________ a. Less: variable cost b. Less: Fixed Cost $__________ Operating income $__________ The break-even point can be expressed in terms of sales dollars or number of units. The break-even units tells us how many units must be sold so that operating income is $0. Koller Computing is examining cost behavior patterns. Your recommendation is to first determine the break-even point in units. Calculate the contribution margin (CM) per unit. $_____________ Next, complete the formula below to determine the break-even units. $___________/$___________ = ___________ units B. The Profit-Volume Graph A profit-volume graph helps managers to visualize the relationship between profits and units sold. Review the data for Koller Computing. Select the graph that correctly represents the profit-volume graph for Koller. (graph options in the screenshots) C. Effect of Changes to Sales Price, Variable Costs, and Fixed Costs Now consider each of the following scenarios for Koller Computing. Calculate the contribution margin (CM) per unit, rounded to the nearest dollar, and the new break-even point in units, rounded to the nearest whole unit, for each scenario separately. Scenario 1 Koller has been experiencing quality problems with a materials supplier. Changing suppliers will improve the quality of the product but will cause direct materials costs to increase by $1 per unit. CM per unit: $________________ Break-even units: ________________ units Scenario 2 Koller will dispose of a machine in the factory. The depreciation on this equipment is $500 per month. CM per unit: $________________ Break-even units: ________________ units Scenario 3 After some extensive market research, Koller has determined that a sales price increase of $2 per unit will not affect the sales volume and will be effective immediately. CM per unit: $________________ Break-even units: ________________ units
A. Break-even point in units
Assume that you are part of the accounting team for Koller Computing. The company currently expects to sell 700 units for total revenue of $17,500 each month. Koller Computing estimates direct materials costs of $3,150, direct labor costs of $4,200, variable overhead costs of $2,100, and variable selling and administrative costs of $1,050. The company also expects fixed costs of $4,000, which includes fixed overhead and selling and administrative costs. Using this information, complete the contribution margin income statement shown below.
Koller Computing Contribution Margin Income Statement
Kindly select which of the two is the correct answer in the sales colum as well as input the correct $ values in the corresponding columns
| Sales | $__________ |
| a. Less: variable cost b. Less: Fixed Cost | $__________ |
| b. Contrubution margin b. Gross margin | $__________ |
| a. Less: variable cost b. Less: Fixed Cost | $__________ |
| Operating income | $__________ |
| The break-even point can be expressed in terms of sales dollars or number of units. The break-even units tells us how many units must be sold so that operating income is $0. |
Koller Computing is examining cost behavior patterns. Your recommendation is to first determine the break-even point in units.
Calculate the contribution margin (CM) per unit. $_____________
Next, complete the formula below to determine the break-even units.
B. The Profit-Volume Graph
A profit-volume graph helps managers to visualize the relationship between profits and units sold. Review the data for Koller Computing. Select the graph that correctly represents the profit-volume graph for Koller.
(graph options in the screenshots)
C. Effect of Changes to Sales Price, Variable Costs, and Fixed Costs
Now consider each of the following scenarios for Koller Computing. Calculate the contribution margin (CM) per unit, rounded to the nearest dollar, and the new break-even point in units, rounded to the nearest whole unit, for each scenario separately.
Scenario 1
Koller has been experiencing quality problems with a materials supplier. Changing suppliers will improve the quality of the product but will cause direct materials costs to increase by $1 per unit.
| CM per unit: | $________________ |
| Break-even units: | ________________ units |
Scenario 2
Koller will dispose of a machine in the factory. The depreciation on this equipment is $500 per month.
| CM per unit: | $________________ |
| Break-even units: | ________________ units |
Scenario 3
After some extensive
| CM per unit: | $________________ |
| Break-even units: | ________________ units |
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